Obradovich: Push is coming for more business incentives

Dec. 13, 2012

Written by

Kathie Obradovich

Just as some state legislative leaders were telling Iowa chamber of commerce leaders on Wednesday that the state should consider increasing the tax incentives it provides for economic development, an email popped into my box:

“States create fiscal risks by failing to control tax incentive costs,” the headline read. The email was promoting a webinar that the Pew Center for the States will hold today to point out the hazards of states giving away the store through uncontrolled tax credits.

Legislative leaders and Gov. Terry Branstad spoke Wednesday to the Iowa Chamber Alliance, a group representing 16 chambers of commerce and economic development organizations around the state. Generally, the group represents urban areas of Iowa.

The group presented its legislative agenda for 2013. This year, the group is calling for the state’s limit on tax credits offered for economic development to increase back to $185 million. The cap had dropped to $125 million — a level the alliance says will likely be reached within this fiscal year with planned projects.

This year, the alliance said, the Legislature only provided 56 percent of the money requested for economic development programs. For example, Branstad asked for $25 million for new business incentives, but received $15 million.

Republicans in the Iowa House originally had zeroed out the economic development incentive program formerly known as the Grow Iowa Values fund. House Speaker Kraig Paulsen wasn’t wearing his Santa hat at Wednesday’s forum, although he didn’t rule out an increase.

Senate Majority Leader Mike Gronstal said over the past 30 years, lawmakers have generally provided between $15 million and $45 million for economic development incentives. “This was pretty close to the lowest it’s been in that 30 years of my experience,” he said. “I don’t think we provided enough tools. We fought for more.”

He compared the state’s economy to his garden, saying winter is over and it’s time to make improvements to ensure a productive season for new growth. In Iowa, that apparently will include a lot of new fertilizer.

Branstad said he will ask for more money for economic development tools, but said he wouldn’t specify how much until he releases his budget next month. He touted the benefits of state incentives for companies like Orascom Construction, a fertilizer company that will invest $1.4 billion in Lee County and receive about $240 million in state and local tax incentives.

The project held the record for a single investment in Iowa for about two months. In November, another fertilizer company, CF Industries, announced it would invest $1.7 billion in a new facility in Woodbury County. The state has approved $1.5 million in direct incentives, plus $22 million in tax credits.

There are lovers and haters of economic development incentives on both sides of the partisan aisle. The Pew Center’s alarm about uncontrolled tax giveaways in other states may fuel concerns expressed over the years by left-leaning policy groups and liberal Democrats that Iowa is frittering away too much revenue. Some conservatives complain about the state “picking winners and losers.” They would rather see lower tax rates overall instead of targeted incentives.

Iowa has been doing a better job of evaluating its tax credits since 2009, when the Iowa Film Office scandal prompted an overall review. Branstad and his economic development director, Debi Durham, are both experienced when it comes to employing incentives to lure businesses despite relatively high corporate and property tax rates.

Iowa’s relatively healthy economy means the state has an edge when it comes to attracting commercial development. That will change when the national economy improves. Now is the time to press Iowa’s advantage making sure its tax climate, economic development tools and workforce training programs are as aggressive as possible.

But lawmakers need to put just as much effort into oversight, transparency and review of every dollar spent. There’s no point in spreading a load of taxpayer-funded fertilizer just to cultivate a bunch of weeds.